E. & J. Gallo Winery v. Spider Webs Ltd.

• Decision Date: 03 April 2002
• Docket Number: No. 01-20333.,01-20333.
• Parties: E. & J. GALLO WINERY, Plaintiff-Appellee, v. SPIDER WEBS LTD.; Steve E. Thumann; Pierce A. Thumann; Fred H. Thumann, Trustee, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

286 F.3d 270

E. & J. GALLO WINERY, Plaintiff-Appellee, v. SPIDER WEBS LTD.; Steve E. Thumann; Pierce A. Thumann; Fred H. Thumann, Trustee, Defendants-Appellants.

No. 01-20333.

United States Court of Appeals, Fifth Circuit.

April 3, 2002.

Craig William Weinlein (argued), Carrington, Coleman, Sloman & Blumenthal, Dallas, TX, for Plaintiff-Appellee.

Bernard Lilse Mathews, III (argued), Hocker, Morrow & Mathews, Spring, TX, for Defendants-Appellants.

Appeal from the United States District Court for the Southern District of Texas.

Before GARWOOD, JOLLY and DAVIS, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

The Ernest and Julio Gallo Winery ("Gallo") holds a trademark in the name "Ernest & Julio Gallo." Spider Webs Ltd. registered the internet domain name "ernestandjuliogallo.com" (the "domain name"). Gallo sent Spider Webs a letter requesting that they release or transfer the domain name to Gallo, but Spider Webs refused to do so. Gallo sued Spider Webs under the Anti-Cybersquatting Consumer Protection Act ("ACPA"), and under federal and Texas anti-dilution, trademark infringement, and unfair competition laws. After this litigation began, Spider Webs hosted a web site at the domain name that was critical of this litigation, of alcohol, and of corporate America. The parties consented to proceed before a magistrate judge, who granted summary judgment to Gallo on the ACPA and Texas Anti-Dilution Statute ("ADS") claims, issued an injunction under the ADS, ordered the transfer of the domain name to Gallo under the ACPA, and awarded statutory damages to Gallo under the ACPA. Spider Webs appeals. We AFFIRM.

I

Ernest & Julio Gallo Winery ("Gallo") registered the trademark "Ernest & Julio Gallo" on October 20, 1964 with the United States Patent and Trademark Office, as Registration Number 778,837. Gallo has registered a number of other trademarks, as well as internet domain names, but had not registered the domain name at issue here. It is no surprise to us that Gallo has sold more than four billion bottles of wine and has spent more than $500 million promoting its brands. On the other hand, the individual defendants, brothers Steve and Pierce Thumann, and their father, Fred Thumann, trustee, run a family-owned prehanging millwork business named Doortown, Inc. In June 1999, they created Spider Webs Ltd. as a limited partnership. According to Steve Thumann, Spider Webs's business plan is to develop internet address names. It has registered more than 2000 internet domain names through Network Solutions, Inc., one of the companies responsible for the registration of internet domain names. Approximately 300 of these contained names that could be associated with existing businesses, including "ernestandjuliogallo.com," "firestonetires.com," "bridgestonetires.com," "bluecross-blueshield.com," "oreocookies.com," "avoncosmetics.com," and others. As the trial court found, because internet domain names cannot contain ampersands or spaces, and because all internet domain names must end in a top-level domain such as ".com," ".org," ".net," etc., "ernestandjuliogallo.com" is effectively the same thing as "Ernest & Julio Gallo." E. & J. Gallo Winery v. Spider Webs Ltd., 129 F.Supp.2d 1033, 1041 (S.D.Tex.2001). Spider Webs sells some of the names it has registered on its web site and on the internet auction site Ebay (and apparently has refused to accept any bids of less than $10,000), although it has not yet offered "ernestandjuliogallo.com" for sale. Steve Thumann admitted in his deposition that "ernestandjuliogallo.com" is valuable because of the goodwill that Gallo had developed in its name, and that when they registered this domain name they "hoped that Gallo would contact us and we could assist them in some way." However, Spider Webs did not initiate any contact with Gallo, nor did it attempt to sell the domain name to Gallo.

Approximately six months after Gallo brought this lawsuit, Spider Webs published a website at "ernestandjuliogallo.com" that discussed the lawsuit, the risks associated with alcohol use, and alleged misrepresentations by corporations. It contained a picture of the upper half of a wine bottle with the words "Whiney Winery" ("the Whiney Winery website"). It had links to a number of other pages on the site, including: an Alcohol Awareness page that discussed the dangers of alcohol; an "Our Mission" page that was critical of corporate America; a "Press Release" about the lawsuit; and a letter from a Gallo lawyer. Although the first page contained a disclaimer that stated "This Site Is Not Affiliated With Ernest & Julio Gallo (R) Wineries," none of the other linked pages did. As of the date of the trial court's opinion, typing in "www.ernestandjuliogallo.com" as the address on a web browser led a user to a website entitled "SpinTopic." Spider Webs states that the SpinTopic website is owned by it and is a noncommercial, nonprofit, consumer information site.

II

After the defendants registered the domain name, Gallo sent a letter to Spider Webs, requesting that they release or transfer to Gallo the domain name, but Spider Webs refused to do so. On February 11, 2000, Gallo filed suit against Spider Webs Ltd., Steve Thumann, Pierce Thumann, and Fred Thumann, Trustee (collectively, "Spider Webs"), alleging violations of the Anti-Cybersquatting Consumer Protection Act ("ACPA"), 15 U.S.C. § 1125(d), trademark dilution under federal and Texas law, see Texas Anti-Dilution Statute, Tex. Bus. & Com.Code § 16.29, trademark infringement under federal and Texas law, and unfair competition under federal and Texas law. Approximately six months later, Spider Webs published the Whiney Winery website at "ernestandjuliogallo.com." On August 31, 2000, Gallo moved for partial summary judgment on its claims of violations of the Texas Anti-Dilution Statute and the ACPA. The magistrate judge granted summary judgment to Gallo on these claims, holding that under the Texas ADS Gallo owned a distinctive mark and Spider Webs's actions created a likelihood of dilution of that mark, thereby violating the ADS. E. & J. Gallo, 129 F.Supp.2d at 1037-42. The trial court further held that the ACPA was constitutional, that Spider Webs had registered the domain name in bad faith under the ACPA's standard, that Spider Webs's use was not a fair use, and therefore Spider Webs had violated the ACPA. Id. at 1042-48. The court ordered the defendants to transfer the domain name to Gallo within ten days from the entry of judgment, as allowed by the ACPA, see 15 U.S.C. § 1125(d)(1)(C), and entered a permanent injunction under the ADS restraining them "from using the Internet domain name `ERNESTANDJULIOGALLO.COM,' registering any domain name that contains the word `Gallo,' and registering any Internet domain name that contains the words `Ernest' and `Julio' in combination." Id. at 1048. The court also awarded Gallo $25,000 in statutory damages under the ACPA, plus post-judgment interest and costs. The court granted Gallo's unopposed motion to dismiss the rest of its claims, without prejudice. Spider Webs moved for a new trial, which the magistrate judge denied. Spider Webs then filed this appeal.¹

III

We review the trial court's grant of summary judgment to Gallo on its ACPA claim de novo, applying the same standard as the district court. Mississippi River Basin Alliance v. Westphal, 230 F.3d 170, 174 (5th Cir.2000). Summary judgment is appropriate if "there is no genuine issue as to any material fact and [] the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). "This Court will consider the evidence in the light most favorable to the non-movant.... [I]f no reasonable juror could find for the non-movant, summary judgment will be granted." Mississippi River Basin, 230 F.3d at 174.

Spider Webs does not appeal the holdings that Gallo had a valid registration in its mark, that the mark is famous and distinctive, and that the domain name registered by Spider Webs is identical or confusingly similar to Gallo's mark. However, Spider Webs argues that they did not act with a "bad faith intent to profit," as required by the ACPA. The ACPA prohibits "cybersquatting" by providing that:

A person shall be liable in a civil action by the owner of a mark, including a personal name which is protected as a mark under this section, if, without regard to the goods or services of the parties, that person

(i) has a bad faith intent to profit from that mark, including a personal name which is protected as a mark under this section; and

(ii) registers, traffics in, or uses a domain name that —

(I) in the case of a mark that is distinctive at the time of registration of the domain name, is identical or confusingly similar to that mark;

(II) in the case of a famous mark that is famous at the time of registration of the domain name, is identical or confusingly similar to or dilutive of that mark; or

(III) is a trademark, word, or name protected by reason of section 706 of Title 18 or section 220506 of Title 36.

15 U.S.C. § 1125(d)(1)(A). In order to determine whether someone has acted in bad faith under the ACPA,

a court may consider factors such as, but not limited to

(I) the trademark or other intellectual property rights of the person, if any, in the domain name;

(II) the extent to which the domain name consists of the legal name of the person or a name that is otherwise commonly used to identify that person;

(III) the person's prior use, if any, of the domain name in connection with the bona fide offering of any goods or services;

(IV) the person's bona fide noncommercial or fair use of the mark in a site accessible under the domain name;

(V) the person's intent to divert consumers from the mark owner's online location to a site accessible under the domain name that could harm the goodwill represented by the mark, either for commercial gain or with the intent to tarnish or disparage the mark, by creating a likelihood of...